Foreign Charities Operating in Canada

Recent Canadian cases such the Tel-Aviv Foundation case, The Magen David Adom case and the Bayit Leplitot case, all decided in the last few years should be of particular interest to Canadian charities that operate outside of Canada. They all illustrate the importance of understanding and following the rules for Canadian charities operating abroad.

Here is a copy of my presentation on the legal requirements for Canadian charities operating abroad. The presentation discussed CRA positions and documents, case law, and various other legal, practical and ethical issues that a Canadian charity may face.

Canadian Charities and Foreign Activities -This article published in The Philanthropist describes the permissible structured relationships and agreements, review a number of cases dealing with Canadian charities operating abroad, and highlight some of the challenges facing Canadian charities that have foreign activities.

In this article I discuss how Canadian charities can work with other Canadian or International Organizations that are not registered Canadian charities as long as they maintain direction and control of the Canadian resources.

In April 2008, CRA released a Consultation on proposed policy regarding fundraising by Registered Charities (RC4456-e) (“Fundraising Consultation”). This document is a relatively short six page overview, and CRA has recently provided charities with a more detailed document entitled “Background information for proposed policy on fundraising by Registered Charities” which is 29 pages (“Background Document”). The background document provides greater detail, further definitions of terminology and CRA’s positions on various points. In this article I will discuss the content of the Fundraising Consultation and Background Document, discuss and analyze the criticisms from others of these documents, and provide my own comments.

This excellent slide presentation by Terry de March of the Canada Revenue Agency, Charities Directorate, highlights the most important compliance problems for registered Canadian face. Many charities could avoid problems by reading this article and ensuring compliance with the issues raised.

In the Travel Just case CRA had refused to register an organizations whose objects were very broad. The Federal Court of Appeal agreed with CRA. [Subsequently the Supreme Court of Canada refused an application for leave to appeal.]

There are many options for foreign universities who are interested in fundraising in Canada and I have discussed 6 different options. It is time to think of your alma mater or your parent’s alma mater and how Canadians can support these universities.

This article discusses how Canadian charities can obtain legal services in a way that will not break the bank. This is a big problem. According to the T3010 statistics a majority of charities spend zero on professional services which services include legal and accounting services. This is far from desirable if one thinks that accountability, transparency, good governance and compliance with the laws are important.

Imagine has revised its Code of Ethics (or Ethical Fundraising and Financial Accountability Code) and in this article I review the changes and provide a critique of the strengths and weaknesses of the Imagine Canada’s Code of Ethics.

The Globe & Mail article I referred to above on Canadian disaster relief charities not complying with the rules provides one of many illustrations of the importance of Canadian charities understanding and complying with CRA guidelines on Canadian charities operating outside of Canada. If you make it through this giving season with your fingers crossed and without any scrutiny then consider in the new year having a informal legal audit of your foreign activities. It is the best gift you can give to your charitable loved one!

In these files we list every country and the individual Canadian charities that operate in those countries according to the 2005 T3010 information. By providing this information charities and donors will be aware of which organizations operate in each country. This will assist charities interested in beginning a new operation to identify a source of information on a particular country or perhaps to partner with that Canadian charity instead of going it alone. Although the Canadian Council for International Co-operation (CCIC) has a good map on its website (http://www.ccic.ca/) with information on which countries each of its members operate in, the map only covers their 100 or so members and not the 12,000 or so other organizations that operate outside of Canada.

This brief article looks at how many Canadian Charities operate in each foreign country. The Top Five countries of operation are the United States (964), Mexico (423), India (356), Haiti (285) and the Philippines (191). It is no surprise that the US is number 1 as many charities are involved with US charitable activities or use US agents, although some of the other rankings are interesting.

On July 2, 2008 the Lobbying Act came into force and many non-profits and charities are completely unaware of its existence or its effect on their activities. Lobbying is defined broadly under s. 7 of the Lobbying Act and includes the development of any legislative proposal by the Federal Government, or lobbying on the passage, defeat or amendment of any bill or resolution, advocating for amendments to any regulation, “the development or amendment of any policy or program of the Government of Canada”, or “the awarding of any grant, contribution or other financial benefit by or on behalf of Her Majesty in right of Canada”. Canadian non-profits and charities that do political advocacy or lobbying with the federal government need to consider whether their activities fall within the requirement to register under the Lobbying Act. This article may be helpful in understanding whether a charity or non-profit must register.

Here is a sample contractor agreement for a Canadian registered charity conducting foreign activities I prepared it for the Capacity Builders Charity Law Information Program (CLIP) in order to assist charities with understanding what such an agreement could look like.

CRA has just released a new guidance called “Canadian Registered Charities Carrying out Activities Outside Canada”. Although the name indicates “foreign activities” this document deals with a lot more than foreign activities. It covers the relationship between a Canadian charity and any non-qualified donee, whether in Canada or abroad. If a Canadian charity has dealing with, for example, a non-profit that does not have charitable status then the same rules apply as a Canadian charity dealing with a foreign entity. Essentially, almost all organizations outside of Canada are non-qualified donees. If you are going to transfer resources to them you need to maintain “direction and control” over those resources. This document helps a Canadian charity understand what is required for direction and control. Failure to maintain direction and control can result in a 105% penalty of the amount transferred and/or revocation of charitable status.

This article discusses a Canadian legal perspective on Planned Giving Internationally. It was written by Mark Blumberg and recently appeared in “Your Guide to Charitable Giving and Estate Planning”, a supplement that appeared in the Globe and Mail on Friday May 11, 2007 and was produced by the Greater Toronto Area Roundtable of the Canadian Association of Gift Planners.

Canadian non-profits that do NOT have charitable status have their own legal requirements, which are different from those of registered charities. Such non-profits generally have greater flexibility in terms of activities, however, they do not have some of the advantages of registered charity status, such as the ability to issue tax receipts.

In this article I discuss the issue of whether Canada has too many charities or too few. If one still wants to create a charity, some of the considerations and practical details of how one does establish a Canadian registered charity.